Apply Match To TH Minimum

[Guest amybu99]

I have a top heavy 401(k) plan. The employer makes a matching contribution of 50% of deferrals up to $1,000. I want to apply the match towards the top heavy minimums for the non-key employees. It is my understanding that only the difference between the match and the 3% TH minimum needs to be contributed. There is one non-key whose match exceeds the 3% TH minimum. For simplicity let's say this individual's match is equal to 4% of their comp. Does this mean that each non-key employee will need to be allocated 4% of their comp.? How else could I justify one non-key employee having annual additions totaling 4% of their comp. when all the other non-keys are only getting 3%. Help!

[R. Butler]

You are correct that the match can be applied towards top-heavy minimum contribution requirement. If non-key is getting already a 4% match no additional contribution required for that individual. If another non-key is getting only a 2% match, an additional 1% top heavy contribution to that participant would generally be required. If yet another had no match, the full 3% top heavy would generally be required.

You do not have to bring everybody to 4% simply because someone had a 4% match.

I wouldn't have a difficulty explaining why the one person got 4%. He got a 4% match because he deferred a sufficient amount to get a 4% match. The difficulty I have is explaining to the person who did defer why he is not getting the additional 3%, while those that did nothing are getting 3%.